Rome-Floyd United Way Director Rich Lampkin said if Washington were to put a cap on what you can deduct for charitable giving, if the cap is high, it’s not going to impact a lot of people, but it would impact a lot of money.
“I think you would see fewer of these, what we call megagifts,” Lampkin said. I think a cap would be a very hard pill for nonprofits to have to bear.”
During the presidential campaign President Obama indicated he would cap the federal tax charitable deduction to 28 percent for individuals earning more than $200,000 and families earning more than $250,000. The current cap is 35 percent for a charitable deduction.
Lampkin said that if Washington wants to turn more social aspects of society over to the private not-for-profit sector, the nonprofits would be hit twice. “They’re going to have less money, and then government is going to ask them to do more,” Lampkin said.
Looking at the possibility of having Washington raise tax rates, the local United Way chief said individuals are likely to exercise more scrutiny to determine where they will get the biggest bang for their charitable dollar.
“If somebody ends up having to pay another $1,000 in taxes, that’s $1,000 they would not have to even consider being charitable with, so a tax increase, especially at the lowest levels, will have an impact on what people can give,” Lampkin said. “In the health and human service area where we see money that comes to us from hard-working people who are just above the line, it will have an impact.”
Rome Habitat for Humanity Executive Director Bruce Day said that any talk of changing the way people could take a tax deduction for charitable giving is of great concern to the Habitat organization. “We would be opposed to any measure that would do that,” Day said. “Especially during these difficult times, that is that little extra bit of incentive that helps a person to act on their goodwill, to give and help an organization. If that’s back on the table again at the state level or the national level, then Habitat will be opposed to it.”
Day said fundraising has been a challenge during the economic slump of the last four or five years. “Gifts are down, and doing fundraising events is a difficult way to go about raising money; we look at it more as raising awareness,” Day said.
The economic situation has created sort of a double whammy for Habitat. Day said that on one hand, not having enough money to build as many homes as the organization would like to on an annual basis has been an issue.
On the other hand, Day said Habitat is facing a challenge to find potential homeowners who can qualify for loans even under the generous standards that Habitat uses. “We don’t charge any profit, and of course, we extend a zero-interest loan, but even with those terms we’re having great difficulty finding families that qualify,” Day said. “What we’re seeing is that families that are applying have too much debt. They’re over their heads in debt and trying to keep their heads above water, but often they’re doing that by going into debt, and so we can’t give them a loan.”
Bill Davies, the founder of homeless shelters in Rome that bear his name, said that similar to the Habitat example, the homeless shelters are getting hit with a double-edged economic crisis. “We get it from the economy being real tight and from people needing our services at the same time,” Davies said.
Davies does not have a real strong feel for how changes in the tax code might impact giving to his organization. “We get no federal, state, city or county funds of any kind,” Davies said. “All of our base is literally from individuals, families, churches, businesses, organizations in Rome and Floyd County. How it will affect them individually is hard to know. Some people are really, really struggling now, some people look at charitable contributions as discretionary. Some people will continue to support us even if they feel some pain and discomfort in doing it.”
Davies said he doesn’t think he’s had too many donors outright cut off their giving. “Some churches have looked at their budgets and said this is one place that we can cut a little bit; they hold on and send as much as they can as often as they can,” Davies pointed out.
One painful aspect of the economy that has already hit the Davies group hard is that they have had to shut down the women’s shelter. It was located in a rental property, and the landlord lost the property back to the bank.
“We came to the realization that we had to spend thousands of dollars on the women’s shelter, and with the bank owning it, it could be sold at any time,” Davies said. “We didn’t feel like it was wise to put a lot of money in that, so we’re going to a resourcing model for women. We’re still helping women find shelter, but we’re working through other agencies and organizations.”
Davies said that the organization does have some property where it hopes to build a new shelter. “But right now is not the time to start a fundraiser,” Davies said.
Charlotte Atkins, executive director of Cancer Navigators in Rome, said the prospect of tax deductions for charitable donations being changed is something the community needs to be paying attention to.
“Any caps or elimination of charitable deductions would have a devastating effect on nonprofits,” Atkins said.
“People choose where to donate their money based on their hearts and interests, but a big motivating factor is that they get to deduct those donations.”
Atkins said she has seen figures that would indicate that proposed cuts to charitable giving deductions could slice giving by more than $5.5 billion. “That’s money that would be removed from local economies at a time when the country is still trying to recover financially,” Atkins said.
She said fundraising is already difficult and that Cancer Navigators is doing a lot of smaller events to try to make up for other revenue sources that did not materialize. “At a time when jobs are a focus and the demand for community-based nonprofit services is at an all-time high, it would really make a difference if our local businesses would keep their dollars local and donate to local nonprofits that help the men, women and children of our community,” Atkins said.
There’s no telling how many jobs would be at stake if the government took tax-related action that would have a chilling impact on charitable giving.